How control systems influence product innovation processes: examining the role of entrepreneurial orientation

This paper yields insights into the channels through which management accounting and control systems (MACS) exert an influence on product innovation by examining the extent to which different forms of control (i.e. value systems (VS), diagnostic control systems and interactive control systems (ICS)) are directly associated with the distinct phases of innovation processes. Using survey data collected from 118 medium and large Spanish companies, we find that (1) VS and ICS have significant main effects on the creativity, co-ordination and knowledge integration, and filtering (sub-)phases of innovation processes and (2) the significance and direction of these influences vary depending on the entrepreneurial orientation (EO) of firms. By highlighting the relevance of EO in shaping the influence of MACS on product innovation processes, this study calls for caution in generalising the expected effects of MACS on innovation.     

Insights into accounting choice from the adoption timing of International Financial Reporting Standards

This paper collects survey evidence on the costs and benefits of adopting International Financial Reporting Standards (IFRS). It also examines the motivations for the timing of IFRS adoption. Significant differences exist between early and late adopters for three of nine benefits and for one of six cost measures. No significant differences exist in terms of firm size or the impact of IFRS on contracts. Early adopters perceive themselves as market leaders. They are more certain about the manageability of implementing IFRS and are more specific with regard to the impact of IFRS adoption. Late adoption decisions are motivated by adverse consequences and uncertainty.     

The adoption of international accounting standards by small and closely held companies: evidence from Bahrain

This study examines the accounting practices and the degree of adoption of international accounting standards (IASs) by small and closely held companies in Bahrain. It finds that 86% (31) of the 36 companies responding to the questionnaire applied IASs and they considered IASs to be very relevant for them. All firms prepare balance sheets, and the majority prepares income statements and cash flow statements. They also duly audit these statements. The data collected also revealed that the quotient influence on whether or not a firm adopted IAS was exerted by their external auditors. External auditors exerted the greatest influence on getting firms to adopt IASs. Banks and company partners were the primary users of company financial statements; inventories, depreciation, disclosure on financial statements, and the presentation of current assets and liabilities. The main IASs followed by a majority of firms are those pertaining so. Some of the standards were considered totally irrelevant, contrary to the prevailing idea that adoption of IASs creates an information overload for small and closely held companies. The results of this study indicate that a majority of our respondents did not find that it was costly to adopt or interpret IASs. Those few firms that experienced some difficulties sought clarification from their external auditors. About 84% of those who adopted IASs strongly agreed that using IASs improves their organization's ability to financial assistance from the banking sector. Also, about 90% of the respondents fully agreed that IASs help to achieve the objectives and improve the effectiveness of financial reporting.     

Performance management: a framework for management control systems research

This paper proposes a framework for analysing the operation of management control systems structured around five central issues. These issues relate to objectives, strategies and plans for their attainment, target-setting, incentive and reward structures and information feedback loops. Their central focus is on the management of organizational performance. Because the framework has been inductively developed, its application is `tested' against three major systems of organizational control, namely budgeting, economic value added and the balanced scorecard. In each case, neglected areas of development are exposed and fruitful topics for research identified. It is believed that the framework can usefully be developed further by its use in analysing other instances of management control systems practice, and that case-based, longitudinal studies provide the best route to this end.     

Macroeconomic control, political costs and earnings management: Evidence from Chinese listed real estate companies

Firms in China have faced high political costs during China’s economic transition, because they are affected by macroeconomic policies. However, research to date has offered no consistent conclusions on the relationship between political costs and earnings management in China. This study tests whether real estate firms attempt to decrease earnings during periods of macroeconomic control, using variables related to the national real estate market as proxies for political costs. We find that political costs are negatively related to earnings management in listed real estate firms. In addition, we find that non-state-owned enterprises utilized more income-decreasing accruals during this period. Our results are consistent with the political costs hypothesis.     

Payment choice and currency use: Insights from two billion retail transactions

Using three years of transactions data from a discount retailer with thousands of stores, we study payment variation along three dimensions: transaction size and location; weekly and monthly frequencies; and longer time horizons. In each case, we connect empirical patterns to theories of money demand and payments. We show that cross-sectional and time-series payment patterns are consistent with a theoretical framework in which individual consumers choose between cash and non-cash payments based on a threshold transaction size, and we evaluate factors that may account for the variation in threshold distributions across locations and time.     

Climate change reporting and multinational companies: Insights from institutional theory and international business

Multinational companies (MNCs) have an important impact on climate change, but knowledge on the greenhouse gas (GHG) reporting practices of MNCs is limited. A theoretical framework is developed to provide an explanation of GHG emissions reporting by MNCs. The framework combines institutional theory with the notion of MNC typology from International Business and explains how institutional pressure acting on each typology of MNC influences standardization of reporting practices and GHG emissions data quality. Propositions are developed and empirically investigated using a case study. Global MNCs are predicted to have better quality GHG emissions reporting compared to multi-domestic or transnational MNCs.     

Determinants of the voluntary adoption of digital reporting by small private companies to Companies House: Evidence from the UK

This study examines the factors that influence the voluntary adoption of the digital reporting of the statutory accounts and returns to the company registry (Companies House) by small private companies in the UK. We analyse survey data from 343 members of the Association of Chartered Certified Accountants working in small companies or in practices with small company clients in the UK. The data is examined using statistical methods, mainly PLS-SEM. Our results show the following factors positively influence the voluntary adoption of digital reporting by small private companies: the relative advantage from standardisation benefits, the company's technology competence and support from top management. We also provide evidence that the complexity of the company's accounting system and technology costs inversely influence this voluntary adoption. The study contributes to the emerging literature by expanding our understanding of how the standardisation of financial information flows benefits small private companies. The results should be of interest to small companies and their accountants, regulators in the UK and other jurisdictions planning digital reporting initiatives or seeking to reduce administrative burdens on smaller entities.     

An empirical study on the drivers of management control systems' design in new product development

New product development has changed significantly over the last decade and management control systems have played an important role in this transformation. This study draws on Galbraith's concept of uncertainty and investigates the relationship between project uncertainty, product strategy and management control systems. It also explores whether these systems help or, as argued in the innovation literature, hinder product development performance. Results support the relevance of the project uncertainty and product strategy to explain the design of management control systems. They also show that better cost and design information has a positive association with performance, but that time information has a negative effect.     

Strategy and management control systems: A study of the design and use of management control systems following takeover

This paper describes and analyses the approach taken by four well-known Swedish companies to management control following takeover. The findings suggest two factors which can explain how the management control systems were designed and used after an acquisition: the corporate strategy of the acquirer and the business strategy of the acquired company. The case studies show how these forces could impose mutually inconsistent requirements on the management control system of the acquired firm, and also how these inconsistencies were resolved.     

Enablers of top management team support for integrated management control systems innovations

Top management team (TMT) support has been identified as one of the most important critical factors to the success of management control systems (MCS) innovations. However, prior studies have taken TMT support for MCS innovations as a given rather than considering the factors that determine whether that support will actually exist and the extent thereof. Prior studies also follow a monolithic approach and treat TMT support for MCS innovations as a black box rather than a combination of processes and stages that develop sequentially over time. We conceptualise TMT support for MCS innovations as consisting of two stages (TMT belief and participation in MCS innovations). We draw on Upper Echelon and knowledge creation theories to motivate and test four enablers of TMT support for an integrated MCS innovation. We theorize the four enablers as TMT's strategic IT knowledge, TMT knowledge creation processes, CIO's strategic business and IT knowledge, and the interaction between TMT and the CIO. We test the research model using survey data that was collected from 347 Australian organisations. The results from the data analyses confirm the hypothesised relationships, supporting the theorized synergies among the four antecedents to TMT support. There are several implications for theory and practice that should be considered in future studies examining the role of TMT in supporting new MCS innovations.     

The relationship between business strategy, management control systems and performance: Evidence from China

Over the past two decades, China has emerged as a global economic power, ranking behind only the USA, Japan and Germany. China's continuous global economic power has therefore prompted a surge in interest in understanding Chinese business practices. This paper reports on the results of a survey on the contingent relationship between business strategy, management control systems (MCS) and performance in Chinese Enterprises. The analysis is based on data gathered from 215 enterprises operating within the Xinjiang autonomous region of China. For those firms that were classified as pursuing differentiation strategy, the use of more non-financial based MCS has a positive effect on performance and this finding is consistent with the literature. We also found that for those firms classified as pursuing a low cost strategy, the use of more financial based MCS had a positive effective on performance as suggested in the literature. Our research has implications for understanding management accounting practices in Chinese enterprises.     

Underwriter choice and earnings management: evidence from seasoned equity offerings

Using a sample of seasoned equity offerings (SEOs), this paper examines the association between the choice of financial intermediary and earnings management. We contend that with more stringent standards for certification and intense monitoring, highly prestigious underwriters restrict firms’ incentives for earnings management to protect their reputation and to avoid potential litigation risks, while firms with greater incentives for earnings management avoid strict monitoring by choosing low-quality underwriters. Consistent with our predictions, we find an inverse association between underwriter quality and issuers’ earnings management. In addition, we find that underwriter quality is positively related to SEOs’ post-issue performance, even after controlling for the effect of earnings management. We also find that firms with low-underwriter prestige and high levels of earnings management under-perform the most. However, the effect of underwriter choice on post-issue performance does not last long.

The enactment of management control systems: A critique of Simons

Simon proposes a contingency relationship between a firm's strategy and its management control systems. However, his model underspecifies the relationship between strategic uncertainties and management controls, underplays the recursive impact of management controls on strategy formulation, and ignores the potential influence of managerial characteristics on control system design.     

Accounting and strategising: A case study from new product development

This paper explores the relationship between accounting and strategy in a context that is characterised by pluralistic demands and high uncertainty about outcomes. By way of an ethnographic field study in an R&D intensive company, we analyse new product development (NPD) projects and the way in which decisions and practices concerning these projects are accounted for. Building upon a practice theory perspective, we find that actors account for the appropriateness of NPD practices not only or primarily on the basis of accounting information, but also by “strategising”, i.e. by mobilising different strategic objectives to which these practices are supposed to contribute. We argue that this has to do with the ambiguous demands on NPD and the limits of calculability inherent in NPD design decisions. At the same time, accounting information is not necessarily irrelevant in such a case; it can enter the picture as a general understanding that guides actors’ strategising efforts by reminding them of the ultimate importance of financial numbers.     

Innovation in entrepreneurial organisations: A platform for contemporary management change and a value creator

PurposeThis article examines the significance of innovation to organisations following strategies of entrepreneurial orientation. In particular, the study looks at the significance innovation adds to the implementation of contemporary management control systems (MCSs) and to improved performance in these organisations.Design/methodology/approachA quantitative analysis was conducted based on a random sample of Australian manufacturing companies. A structural equation modelling approach was adopted to test the study hypotheses.FindingsResults suggest that innovation mediates the relationships between entrepreneurial strategy and each of participative budgeting, the balanced score card (BSC), total quality management (TQM), just in time (JIT), and organisational performance. The study does not indicate a significant relationship between entrepreneurial strategy and activity based costing (ABC), even when innovation is in place.Originality/valueThe study empirically tests the vital role of innovation in the organisational adaptive cycle to entrepreneurial strategies, described earlier by Miles and Snow (1978). Further, the study validates a multi-dimensional strategy model first suggested by Langfield-Smith (1997).